dwot (31.46)

Thompson Creek Metals - Where are they now?

8

Thompson Creek Metals is an interesting mining story as they were a big producer taken over by a small producer, Blue Pearl. Interesting, after the take over Blue Pearl ditched their name and took on the Thompson Creek Metals name.

So, 5 quarters ago they had production of somewhere around 4-5 million pounds (4.6 million one year ago) and now it is 6.2 million pounds. They are still a far cry from their 27 million pounds per year guidance they gave 5 quarters ago.

Earnings:

"- Net income per share in the second quarter was $0.52 per basic and $0.45 per diluted common share, compared with $0.41 per basic and $0.37 per diluted common share in the first quarter and $0.51 per basic and $0.45 per diluted share in the second quarter of 2007."

So, in 4 quarters production was up about 35%, and earnings were completely flat, 45c per diluted share both years. They have something about paying extra expenses this quarter, and looking at costs, they have reduced them so there is a potential for increased earnings there, but molybdenum price is strong. I would suggest you can't trust molybdenum price to stay strong. Their cost reductions take care of the first $3 drop in molybdenum price. After that any more price reduction in molybdenum truly kills the earnings.

TCM price is down from when I wrote about it 5 quarters ago. I think was in the $18-20 range, and it went up to $25 before it started taking back and is in the $14 range now.

If anything, TCM has enormous downside risk on earning. Strong prices have strong downside risk. We've seen this happen now in all the commodities.

Molybdenum has some good fundamentals in that it is being used more and more in industry, however, for years when the price was 10% of what it is now miners simply did not extract the molybdenum they had and it went to waste. So, there is a lot of capcity with existing mines for increasing molybdenum.

This one is completely a watch for me. It has the opportunity for a jump in earnings for a small number of quarters but I think there will eventually be a downward correction in that strong moly price.

To put commodity price into perspective, commodities are crashing through the floor right now, however, they are still strong prices compared to historical prices. Prices in some increased as much as the 1000% range, so declining to half or even 40% of a the high can still be up in the 100(s)% range from historical prices.

I finally dropped my rating on this Canadian dog. Had all the fundamentals and technicals to be a great stock, then just stopped performing. Put it on my Watch List, but I am most disappointed. Thanks for the article!

Historically, a commodity boom cycle lasts approx 10 years. Is this one over after 4? I'm new to your blog so forgive me if this has been covered or I am reading your caps shorts wrong. What's your perspective?